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Blurring the Lines

Amazon’s impact and what it means for the produce industry
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Although online grocery sales accounted for just 1 percent of total food and beverage sales in 2014, according to Packaged Facts this could skyrocket to 20 or even 30 percent by 2022—equating to $41.7 billion in sales. Much the same is predicted by the Food Marketing Institute and Nielsen, forecasting 20 percent of all grocery sales will occur online by 2025, which these organizations believe will be valued at $100 billion for that year.

Ease surpasses reluctance
It really boils down to one word—convenience. Consumers want to be able to purchase merchandise of all kinds, Peterson explains, wherever and whenever they want to, be it online or in a store. This is part of the reason Amazon is moving into bricks-and-mortar retail and why Walmart is making a big push into the online realm.

“These two companies are driving the market in retail, in general,” elaborates Peterson, “and you have to watch when elephants dance.” Both Amazon and Walmart, he points out, were pioneers among general merchandise sellers moving into food: Walmart in the 1990s and Amazon in about 2000.

Using a more forceful metaphor, Peterson compares the retailers to gladiators exchanging blows, but forcing spectators to react. “Amazon may not be a big deal by itself, but it’s important to watch how other competitors react,” he stresses.

Impact and repercussions
Peter J. Larkin, president and CEO of the National Grocers Association, which represents the interests and voice of independent supermarkets, says time will tell what the ramifications of the Amazon-Whole Foods deal will be. “There will definitely be an impact on the supermarket industry in general, but it’s too early to tell just how much,” he says.

“Ecommerce is still relatively new in grocery,” Larkin continues. “All signs say it will grow, but the question is whether it will be dominated by Amazon versus traditional supermarket chains or independents.” All are moving in the same direction, he notes, but “it’s too early to know the final result.”

Consultant David Livingston, founder of Wisconsin-based DJL Research, agrees. “Competitors don’t know how this is going to affect them, and it might not affect them at all. But it’s gotten their attention and they’re scared.”

Reputation, Synergy, and Expertise
The Amazon-Whole Foods deal makes sense for each of the partnering companies, in multiple ways. Amazon has been selling perishables through AmazonFresh for some time, but was unable to earn a reputation as a seller of fresh foods. “Whole Foods instantly gave Amazon cachet and credibility,” Peterson says.

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